Tuesday, March 20, 2012

Which Form of "Capitalism" Will Win?

In last Tuesday's New York Times, columnist Thomas Friedman poses the question, "which version of capitalism will win ("the great struggle in the 21st century"), which one will prove the most effective at generating growth and become the most emulated? Will it be Beijing's capitalism with Chinese characteristics? Will it be the democratic developmental capitalism of India and Brazil? Will it be entrepreneurial small-state capitalism of Singapore and Israel? Will it be European safety-net capitalism? Or will it be American capitalism?"

He goes on to share the view of David Rothkopf, author of Power Inc.; "the thing others have most admired and tried to emulate about American capitalism is precisely what we've been ignoring: America's success for over 200 years was largely due to its healthy, balanced public-private partnership - where government provided the institutions, rules, safety nets, education, research and infrastructure to empower the private sector to innovate, invest and take the risks that promote growth and jobs. When the private sector overwhelms the public, you get the 2008 subprime crisis. When the public overwhelms the private, you get choking regulations." "Capitalism thrives when you have this balance," and "when you lose the balance, you get into trouble."

To suggest that the 2008 crisis was the result of the 'private sector overwhelming the public' I think entirely ignores, among other things, government's role over Fannie and Freddie and thirty years of financial sector bailouts... To imply that Capitalism thrives when balance is struck between the private sector and self-seeking politicians, might lead the reader to believe the scales would indeed be balanced (equally by someone's definition)... World history provides irrefutable evidence that societies thrive when the size of government remains small relative to the size of the economy... When, in essence, bureaucrats stay out of the way of the private sector...

As to Friedman's question, "which version of capitalism will win?" It would be the true version - free market capitalism - I assure you (if we'd for once give it a shot), as described below:

Within an ideal free market, property rights are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers. By definition, buyers and sellers do not coerce each other, in the sense that they obtain each other